World Chess (LSE:CHSS) — Investor Presentation

0:00 Good afternoon, and welcome to the WORLD CHESS PLC investor presentation. Tonight's recorded meeting, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your question and press send. Company may not be in a position to answer every question received during the meeting itself, however, can review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll.

0:25 I'd now like to hand you over to Ilya Melozzant, CEO. Good afternoon, sir. Hi. Thank you very much for joining us, and let me start with the presentation. So my name is Ilya Maranzon. I'm the CEO of WORLD CHESS. And I don't have much experience actually talking to retail investors because when we listed back in 2023, we mostly spoke with institutions and not many of those. So it's a little bit of a new space for me, but I'm keen to kind of try to enjoy it and tell you about WORLD CHESS. So WORLD CHESS is the company is a chess company. It's an official chess platform.

1:14 And I'll tell you about what we do and some numbers, obviously. But what is kind of a chess company? There's not many chess companies now in the world because chess until recently was a a hobby space. Not many people were professionals except for chess players, and there was definitely not many not much business involved in chess. But somehow, in the last five years or seven years, it grew into a hugely interesting and very competitive environment. So let me tell you about that and how we fit into it because we're kind of part of that. And we witnessed or actually helped to make chess big and are now trying to to foster the ecosystem as well as the company, obviously.

2:10 So what is an official chess what what is being official chess? So players can get FIDE recognized ratings and titles by playing on world chess. It's exclusive for now, and FIDE is a it's a it's a chess version of FIFA. So it's a chess governing body.

2:36 A little bit of a track record. What we've done with chess and four chess to make it big, so we organized some world chess championships in New York and in London specifically. And that's where the events that put chess on the map or at least some of that. We did the event in London. Maybe some of you who are in London have been to that, and it's been spectacular. And this is when we felt that chess is becoming not only kind of a hobby, but it's not only in the sport. It's a kind of a sector, and we felt it in London. So we organized that match. We invented and broadcast chess tournament called Armageddon.

3:23 It's it's a special TV format, and it's one of the first times I personally seen chess in pubs all over the world, in in The A in Asia, in America, in The UK, and it looked quite spectacular. We also put design of kind of chess onto the map. Maybe some of you have seen this design, which is called chess kama sutra. It was mentioned in Can, but most of what most of all, it helped to start a whole niche of chess merchandise. And people were able to kinda wear it if they like chess and speak about it, and it kind of became a little bit of a fashion trend, which we started.

4:16 We also not invented, but we kind of implemented an official chess patron saint. It's Theresa of Avila. She was a sixteenth century mystic who liked chess. So we designed an official icon and actually got an approval from from the on this. But it's also our kind of way of building a little bit of chess ecosystem from the design point of view. Because when you think about any sport, like hockey or golf, you can easily kind of, in your head, design a cafe.

5:07 So if it's golf, it's clearly clubs and kind of leather and all nice furniture. If it's football, then it's something else. But it's very, very clear. In CHESS, there was nothing like this except for the boards and for very, very bad scanned photos of Vladimir Kramnik. There was nothing. So we were trying to build an ecosystem of design, which then we kind of felt is important for the sport to develop. So is CHESS big? It's huge, actually. It's one of the most played sports in the world now. Official numbers. We back back about maybe ten years ago, we commissioned the study with YouGov, which said that over 600,000,000 people play chess.

5:58 Now it's it's grown. We don't have the official data yet, so that's the oldest official. That's the kind of most recent official data we have, but it's well, one of one of 10 people in the world plays CHESS. And in terms of the business itself, the sector is also quite big. It's roughly a little bit shy of $4,000,000,000, and it's growing at 6 or 7% rate a year. So by 2034, it'll reach about 7,000,000,000 according to stats. And it's ironically not hugely commercialized, so it's a little bit of an empty space for now. There are some big players like chess.com, but that's kind of the only one of the only brands existing in chess except for us.

6:49 So the niche is quite open. So it's not even a niche. It's a major sport commercially, not fully claimed. And we are trying to get for that market to grow and for us to be a major part of it in some ways, and I'll tell you what our thinking is. So a little bit about WORLD CHESS. The company itself is kind of an institution which is part of CHESS ecosystem. So CHESS has only one federation. It's called FIDE, as I mentioned. It's the governing body, and we're the official platform. On world chess, you can play and earn official ratings and titles.

7:36 It's a little bit new because chess is the only sport in the world where you can get official kind of status but by playing online. There is nothing close to it. And right now, chess is divided between professionals and casual players. And it's it's pretty much the same as any sport, but here, you can kind of join the rank of official players by playing online. So that trend is still developing. But right now, according to what we know, only one out of a 100 players is not, let's say, casual. So that ratio is changing, and the sport itself is changing. And by the way, I think I mentioned that in passing that sport became a sport really kind of in a professional sense as a mass sport only a few years ago. Until then, it was kind of mostly a hobby space.

8:41 Second thing, which is enormously important in chess, and we kind of solved it, is online cheating. Some of you are maybe many of you played chess, and sometimes you come across somebody who is probably cheating. So lots of platforms have solved it for their purposes, but we had to solve it for kind of official purposes. Because being the official platform of World CHESS Federation, we had to make sure that if we ban someone or claim that somebody cheated, they can take us to court, and we have to prove it. So our kind of technology is not only based on AI, even though it is, but also it has enormous number of behavioral patterns, which which we use to understand why we we think somebody cheated. So that system is employed in the world chest deployed, and it's used to to a great advantage. We kind of probably find ninety nine point nine percent of cheaters at this time, and the system is improving. And it has been approved by FIDE. It's the only system in the world which has passed their checks.

10:04 So that's also part of the ecosystem. I'm not sure if you read a recent announcement by World CHESS. We also applied for the domains dot chess domains. It's actually a big deal because many sports have their own domains. But in chess, it's even more important because the chess ecosystem is huge. There are players. There are clubs. There are federations. There are coaches. And in some countries, it's it's surprisingly big. For example, in Turkey alone, there there is approximately 70,000 chess teachers because chess is a mandatory subject in schools.

10:50 So giving them adult CHESS domain is phenomenally useful or at least it can be for those who want to get recognition. And we offer hopefully, I can approves our in the feeder's application, then CHESS will have their own dot chess domain, and we'll administer it on feeder's behalf. And, also, it'll be also part of the ecosystem along with the app, with the online ratings, and with domains and with the anti cheating bit. And what we're also working with Fida on now is a way to convert your online rating into offline rating.

11:41 It's actually also kind of a little bit revolutionary, so we don't know how it will work. But at least we're working together with Fida who are also interested in making sure that their rating is adapted globally and more people join FIDE. So that's part of the ecosystem bit we serve to CHESS. A little bit about the product. And product in our case is the app. So we recently passed through a milestone of a million users. For many kind of websites, it's quite important. For chess, it's tiny. So right now, we're only 1% or so of larger players like chess.com.

12:29 But the number of people is growing. Number of games is growing. So we're constantly have to adjust our kind of capabilities

12:39 and resources. And it's it it's expensive, but it's really good because we see the growth. And so it's a million users. So what it gives us is an opportunity to test things right away at a huge scale. So whenever we issue a new feature and stuff like that, we're not only testing it. We're kind of immediately seeing the results so we understand the outcome right away. And it's kind of a proof of concept effectively which happened. And, also, the cool thing about the WORLD CHESS app is that it's new. Meaning that all other chess apps, like chess.com, which is a phenomenal company, they I'm I'm not sure if you follow them. They're private, but data is open. So they have about a 150,000,000 users or maybe even more, and the revenue is definitely more than a $100,000,000 a year. So there is obviously a large competitor, but what we have is kind of official done, and we're trying and plan to kind of use it as much as we can for the benefit of WorldChess and chess in general.

13:56 And in our app, I'll just quickly say that it's new, meaning that it was built recently. We started building it about four or five years ago, but we actually nailed it just a year ago. So and it's technologically advanced. And little things which are important to chess players, like how fast the piece is registered on the board. It's called the ping. Is the in our world, it's it's fastest of all platforms, which is understandable because it's new, and there is not much legacy. So technologically, we're gonna find a very, very good foundation. And now our job is to improve features to get the funnel right and to get more players signed up.

14:58 Password is a little bit of kind of housekeeping interesting things. So we're learning obviously from competitors as well. Like, head of mobile has joined us from chess.com and is and he's helping us to shape the product and avoid mistakes which has been done which have been done by competitors, but learn from them as well because the product of competitors of of chess.com and Nichess and other CHESS platforms, is really, really good in many ways. So, obviously, we're we're learning from them and with them and hope to have the product really, really kind of good for those who like CHESS. I couldn't go much into financials, but you're welcome to ask questions.

15:47 But because of the cadence of the financial reporting, I could only go back to our last annual report. So I'll just show you that there is growth on the platform. And we've been so far investing very, very heavily in infrastructure, like the anti cheating and other kind of things, which allow us to start growing. So I hope we are at that stage, and CHESS itself is growing phenomenally fast. And we are very, very happy to be part of that sector, which, again, I feel is completely underdeveloped in many, many ways.

16:35 And today, I wanted to take the opportunity just to tell you about the main product. Of course, we also produce many other things in the chess world, like the merchandise. We're the official manufacturer of chess sets used in the championship match and stuff like that. But it's also part of that design approach we think is important, not only for us, but also for the sport itself. Thank you very much for listening. And if you have any questions, you're welcome to ask them. And if not, it's also fine. Fantastic. Yeah. Thank you very much indeed for the presentation. As I said, ladies and gentlemen, do please continue to submit your questions just using the q and a tab situated on the right hand corner of your screen. But just while Elliot takes a few moments to review those questions submitted today, I'd like to remind you that a recording of the presentation along with a copy of the slides and the published q and a can be accessed via your dashboard.

17:32 Elliot, if I could actually just to click on that q and a tab, we have got several questions that have just come through. So if you could please read out those questions where appropriate to do so, and I'll pick up from you at the end. Yeah. Absolutely. So I have a few questions from Matt. How do you look to monetize 1,000,000 registered users? So the question is obvious. So we the answer is obvious. Thank you, Matt, for the question. First of all, we sell subscriptions, meaning that you can become a paid subscriber and get analysis and different kinds of features. But the main thing is you'll get the official online rating. When you sign up for a paid subscription on WORLD CHESS, you instantly get FIDE ID once you pass through a very easy KYC.

18:21 And you get the FIDE ID. You get official profile on FIDE website as well as with us, and you'll get the official rating. So we get subscriptions based on the previous number. So

18:38 in in our world, roughly slightly more than 1% of people usually subscribe to paid subscription. Second is advertising, especially that's important for mobile. And in in special in kind of in specific regions like The US, Europe, the monetization of free subscribers is bringing revenue. Third is we sell merchandise. For example, if you you should never buy paid subscription, you would maybe buy an official CHESS set if you'd like. Fourth is we organize events. We do media projects which also target those who like chess, and we have other projects which are helping us to monetize that number.

19:30 But, also, the number is growing, so the monetization is straightforward. We exactly know what to do. And the trick in my in my view is to make sure that the product is outstanding so that it's not only kind of monetization of a of a new user. It's also monetization of the existing ones. So let's see. The next question, I'll then answer it. So, Stacy, thank you very much that answered your question. I'm glad. Next question is also from Matt. How quickly can subscriber revenue grow without increased marketing spend, and how significant can be the new online to official rating from financial perspective? How should we think about that? It's a little bit tricky. So I personally think that the the conversion of on offline to of online to offline can be quite big.

20:33 And I'll give you a quick reason. There are 200 chess federations, and 80% of all offline tournaments take place in 20 federations. That's France, Spain, Brazil, Russia, and so forth. So a 100 a 150 or more chess federations don't have any any rated tournaments at all. And in order to become a professional chess player, you have to travel. So you have to let's say, if you're in India and if you're really talented, you need to go to a tournament far away, and your parents need to take if you're a child, your parents need to take off for a week from work. There is this famous player, Magnus Carlsen.

21:21 Maybe you heard of him. He's the kind of number one player now. And in order for him to reach a hun I think 1,800 rate or 1,600 rating. So it wasn't big, but it was a substantial kind of a jump from 1,200. His parents had to take off a year of work. So they traveled around Europe, and he played in tournaments. His parents and himself are from Norway, so they had money to do that. But if you're, let's say, from India or from Brazil or from anywhere, not many parents are able to take you to to a tournament and pay substantial amount of money for the hotels, for tournament fees, and in order for you to kind of show that you're good. So for those countries, I think it's phenomenally important, and it's much, much, much cheaper than to go to tournaments so they can actually grow professionally.

22:16 And then once they do reach, let's say, 1,800, they can claim a stipend or at least show their parents that they have a chance of becoming a professional player. And my view is that it's it's in the number of those people is substantial. But it very much depends on how this progress of a sport, not only of of world chess, but also from from a sport sport point of view, will progress. So we don't know. We I feel that it's a huge deal and for chess and for world chess, but we'll see what it looks like. And in terms of revenue growth, well, we haven't been we haven't had large numbers until quite recently.

23:10 So right now, monetization is a big deal. So we introduced advertising. We announced it actually maybe a few months ago because until then, we didn't have numbers which warranted investment into the infrastructure, which allows us to sell ads and and scale. Now we do. So I think it'll grow based on simply the numbers and the growth of traffic, which we see. And you it's open numbers, so you can look at look at it at similar web and see that the numbers have grown substantially. And now we're in a position to monetize it. So so that's it. Fantastic. Look. Thanks for covering off those questions for investors. Of course, any further questions come through, Ilya and the team can review those, and we can publish responses on the investor meet company platform.

23:58 Just before redirecting investors to provide you with their feedback, known particularly important to you and the team. Ilya, can I just ask you for a few closing comments, please? Thank you very much for joining. Again, it's my first time, and we haven't been quite active in talking to investors because we didn't even do an IPO. We did the direct listing. So we now are looking forward to actually working with investment community in London and globally and trying to build a relationship as well as the product to for you to enjoy whether you're an investor or not. So check out worldchef.com.

24:46 Tell us what you think. Maybe test it out and send us a message, and we'd love to hear from you. Fantastic, Lila. Thanks indeed for updating investors today. Can I please ask investors not to close this session? It should be automatically redirected to provide your feedback in order that that you and the team could better understand your views and expectations. Only take a few moments to complete, and that's greatly valued by the company. Bob, Ilian, PLC would like to thank you for attending today's presentation. That concludes today's session, and good